Avoid Risky Policies when Collecting Assessments from Delinquent Condominium and HOA Homeowners

Question: Can the Board of a Condominium Association or HOA post a list of delinquent members on the Association’s website to shame them into paying?

In a word, NO. Associations who post a list of delinquent members by name may face a defamation/slander lawsuit or violate other privacy protections by doing so if the information is incorrect. (Some Board’s and management companies may also be slow to update the list and so it is usually not a good business practice to publish). However, Associations have the right to publish Board minutes listing unpaid assessments without identifying the delinquent owner by name or other specific identifying information. The Board has a fiduciary duty to membership to share financial information as to the overall financial health of the Association, but must also balance individual member’s privacy concerns.

If a member fails to pay their monthly or annual assessments on time and becomes delinquent, a Board should take the appropriate steps to collect by following the Association’s Collection Policy if one exists. Board members have a fiduciary obligation to manage the fiscal health of the Association. When a Board has turned the matter over to the Association’s legal counsel, let the attorney handle it. It is not appropriate for a member to go around the attorney and communicate to a Board member directly. Individual Board members should not be communicating with delinquent members as this may complicate the matter and require extra work by the attorney. Additionally, a Board member making decisions without a quorum and majority of the Board in some instances may be incorrect and a risky practice depending on the Association’s governing documents.

Keep in mind that most collection policies provide discretion to the Board for delinquent members to enter into a payment plan. In using this discretion, a Board should ensure that a delinquent homeowner provides some evidence that they are suffering from financial hardship without requiring information that is privileged or protected from disclosure by law. Typical reasons for financial hardship include medical conditions, employment loss, or military service. Typical instances that are not commonly considered hardship by many Boards include a poor real estate market, the economy, or unit owners having difficulty selling their units due to reluctance to list the unit for true market value.

Accepting a payment plan does not mean that an Association should accept less than the total amount of assessments owed. While offering a reduction on dues may seem like a neighborly thing for a Board to do for a homeowner suffering from financial hardship, it only shifts the financial burden onto the other homeowners.

Board members of Condominium Associations and HOAs should review their collection policy and governing documents to ensure risky policies are not being practiced. If you have any questions or would like further information, please feel free to contact us.

John D. Gwyn is an attorney in our Livonia office where he focuses his practice on the representation of community associations, management companies and developers with a particular emphasis on real estate and commercial litigation. He has handled many types of community association related matters, including assessment collections, lien foreclosures, bylaw violations, civil rights defense and creditor bankruptcy matters.

Mr. Gwyn has gained experience in community association law over the years through his representation of condominium and homeowners associations, as well as individual homeowners, in matters involving real estate, contract, and construction defect litigation issues. His extensive litigation and transactional background provides him with the experience necessary to handle even the most complex legal issues that neighborhood associations may encounter. He may be reached at (734) 261-2400 or jgwyn@cmda-law.com.